Guarantors dismissed claim for set-off of alleged lease breaches as they are not tenants and complaints were untimely.

Neutral Citation: [2015] IEHC 127

THE HIGH COURT

[2014/287 S]

BETWEEN

CELESTINE MCNALLY

PLAINTIFF

AND

LINDA ANN LANNIGAN & NICOLA O’REILLY FAHY

DEFENDANTS

JUDGMENT of Ms. Justice Murphy delivered on the 27th day of February, 2015

1. The plaintiff seeks judgment on foot of a summary summons in the amount of €109,840.84 being rent due by Vonax Ltd. in respect

of a lease of premises on the ground floor of 19 Maypark, Malahide Road, Donnycarney in the city of Dublin. The said lease, dated

24th April 2008 provided that the liability of the tenant, Vonax Ltd., be guaranteed by James O’Reilly, Linda Ann Lannigan and Nicola

O’Reilly Fahy. It was a specific term of the lease that the guarantors waive any right to require the landlord to proceed against the

tenant or to pursue any other remedy whatsoever which may be available to the landlord before proceeding against the guarantor.

2. The following matters are not in dispute between the parties. A lease of the premises at 19 Maypark, Malahide Road, Dublin 5 was

concluded on the 24th April 2008 between the plaintiff and Vontax Ltd. Guarantors of the tenant’s liabilities were James O’Reilly, Linda

Ann Lannigan and Nicola O’Reilly Fahy. The term was for a period of nine years and nine months commencing on 28th February 2008

and the rent was to be €70,000 per annum. The defendants, as directors of the tenant company, went into possession sometime

before Valentines Day. In March 2009 the weekly rent was reduced to €600 though the terms and conditions of this reduction are not

agreed between the parties. On 15th November 2010 a letter was sent by the plaintiff’s solicitors to all three guarantors claiming that

the arrears of rent then due were in the sum of €109,840.84 and pointing out that the arrears had been steadily increasing and the

fact of their liability as guarantors jointly and severally for the entire amount. A demand was made for the full monthly rent as well as

concrete and binding proposals to reduce the arrears. Further letters were sent to the three guarantors on 30th November 2010 by

the plaintiff’s solicitor placing the guarantors on notice that unless a substantial payment was received together with a firm proposal

for monthly reduction of outstanding arrears by the 14th December 2010 such action as might be advised would be taken. Further

letters were sent to the three guarantors on 22nd December 2010 notifying them that proceedings would be issued, that by reason of

the amount they would have to be issued in the High Court and asking whether the defendants had a solicitor who would accept

service of those proceedings. On 31st December 2010 the premises were handed back to the plaintiff. There was no response to the

correspondence sent in November and December.

3. A summary summons issued against the three guarantors on 1st February 2011, an appearance was entered by the defendants on

31st March 2011 and on the 30th March 2011 respectively. An appearance was entered by the third guarantor James O’Reilly on 12th

January 2012. Arising from a misunderstanding relating to letters of demand the plaintiff was advised that a notice of discontinuance

should be issued against these two defendants and that she should proceed solely against James O’Reilly. In due course judgment for

the sum of €109,840.84 was granted by the Master of the High Court against Mr. James O’Reilly on 29th January 2013.

4. A fresh letter of demand was sent to these two defendants on 20th December 2013. No response was received to that letter. A

new summary summons was issued on 24th January 2014 against the two defendants. The first named defendant entered an

appearance in her personal capacity on 5th February 2014 and the second named defendant similarly entered an appearance in her

personal capacity a week later on 12th February 2014. A motion for summary judgment issued on 3rd March 2014 grounded on the

affidavit of the plaintiff, Celestine McNally and the motion was returnable for 1st April 2014. On the 8th May 2014 a solicitor came on

record for the defendants and filed an affidavit of the first named defendant sworn on her own behalf and on behalf of and with the

authority of the second named defendant. In this affidavit the defendants raise for the first time a possible defence to the plaintiff’s

claim for summary judgment. The thrust of the proposed defence is that the plaintiff, in breach of the terms and conditions of the

lease, entered into and took possession of part of the demised premises, being a passage to the rear of the garden known as the

corridor and an additional portion to the right of the garden known as the storage area. According to the defendants this caused

considerable logistical difficulties in the daily operation of the business. Secondly, the defendants complain that in or about early

March 2008, unilaterally and without permission, the plaintiff entered the demised premises and took possession of the business

telephone and fax machine which were an integral aspect of the business. This, they claim, resulted in inconvenience and a loss of

business. They name in particular one customer who traded as Inter-fone Flowers. A further element of the proposed defence/cross-

claim is stated to be the plaintiff’s alleged interference with the trading reputation and goodwill of Wood’s Flowerpot with a view to

diverting customers to rival businesses. In her affidavit on behalf of the defendants, Ms. Lannigan exhibits a promotional leaflet for

Mother’s Day which involved another flower shop in the local area. The plaintiff does not dispute this but characterises it as a

promotion for her restaurant in tandem with a local flower shop rather than any attempt to interfere with the defendants’ business.

Further she states that such promotions were available to the defendants but were declined.

5. The Law

The Court has been furnished with two authorities on the issue of summary judgment Aer Rianta c.p.t v. Ryanair Ltd. [2001] 4 I.R

2001 607 and Moohan & Bradley T/a Bradley Construction v. S&R Motors Donegal Ltd. [2008] I.R 2008 650. It appears to the Court

that there is no distinction between the two authorities as to the test which must be applied by the Court. The Court is satisfied that

the test is:-

Whether looking at the whole situation, the defendant had satisfied the court that there was a fair and reasonable

probability that they have a real and bona fide defence. It is not necessary for the defence to establish that they have a

defence which would probably succeed what they must establish on an examination of the whole situation that it was

probable that they have a bona fide defence.

The test is common to both authorities submitted. The Court found the Moohan & Bradley v. S&R Motors to be a more helpful

authority in that the factual circumstance in that case most closely mirrors the situation in this case. In that case the plaintiffs were

seeking summary judgment in respect of sums due on foot of Architect Certificates. The defendants asserted faulty workmanship on

the part of the plaintiff and sought to have the proceedings stayed to enable the issues to be referred to arbitration. Here there is no

dispute about the sum due on foot of the agreed rent but the defendants are seeking to set off against such sum an as yet

unquantified sum arising from alleged breaches by the plaintiff of the tenancy agreement. The law seems clear that a party, in

principle, is entitled to a set off in equity in relation to any cross-claim arising out of the same contract. Thus if a landlord is owed

money on foot of a lease the tenant is prima facie entitled in equity, to a set off in respect of any breaches by the landlord of the

terms of the lease such as might have resulted in loss to the tenant. The problem for these defendants however, is that while they

were both directors of the tenant company, they are not sued in that capacity. They come before the Court as guarantors of the

tenant’s liability to pay the rent. In that capacity, they have no entitlement to a set off of alleged breaches of the tenancy

agreement. Any such breaches are a matter of contract between the tenant and the landlord.

6. There is no dispute between the parties on the amount of the rent. There is no dispute that the rent is due. The defendants do

not contest their status as guarantors of the tenant’s obligations under the lease. In those circumstances, the Court cannot be

satisfied that there is “a fair and reasonable probability that they have a real and bona fide defence” to the plaintiff’s claim.

7. Even if the defendants had been sued in their capacities as directors of the tenant company, the Court is not persuaded that, on

looking at the whole situation, they would have had a fair and reasonable probability of a real and bona fide defence. The complaints

which they now raise about alleged breaches of their tenancy were first raised in May 2014, three and a half years after they handed

back the premises. Despite letters of demand dating from the 15th November 2010, no complaint was made about breaches of the

tenancy agreement. The service of a summary summons in the early months of 2011 brought forth no complaints that the plaintiff had

been in breach of the lease agreement.

8. Even more significant, in the Court’s view, is the fact that the now alleged breaches of the covenant of quiet enjoyment of the

demised premises and the removal of telephone and fax lines took place in early March 2008, weeks before the indenture of lease was

signed on the 24th April of that year. Had there been a real issue in respect of those items one would have expected it to have been

raised and resolved prior to the formal conclusion of the lease agreement. There is no evidence before the Court that there was any

such dispute. On the other hand, there is clear evidence that the demised premises are as contended for by the plaintiff. The map

attached to the original indenture of lease shows that the area which the defendants claim were part of the demised premises, were

not in fact so included.

9. In these circumstances the Court is compelled to the view that the last minute emergence of complaints of breaches of the lease

agreement is more grasping at straws than an indication of the likely existence of a bona fide defence.

10. The plaintiff in all the circumstances is entitled to summary judgment.